South Korea’s Digital Regulation and the U.S.–South Korea Digital Alliance: Facts and Lessons from the Coupang Incident
Seong-yeob Lee
Professor, Graduate School of Technology Management Korea University
President, Korean Association of Information and Communications Law
1. Background—The Shift in Digital Regulation Toward Trade and Security Issues
As global platforms provide services simultaneously across multiple countries, digital regulations adopted by one country can directly affect foreign companies’ market access and cross-border data flows. As a result, national regulations governing personal information, platform competition, cross-border data transfers, cloud computing, and artificial intelligence (AI) are no longer merely matters of domestic law; they are increasingly becoming issues of trade and national security.
In particular, the United States, home to many of the world’s leading global platform companies, increasingly views discriminatory digital-service regulations and data-localization requirements as emerging forms of non-tariff barriers to trade. For example, the U.S. Trade Representative’s (USTR) 2026 National Trade Estimate (NTE) identifies several South Korean digital regulations—including network access fees, restrictions on the cross-border transfer of location data and personal information, public-sector cloud security certification, and online platform regulation—as significant trade-related concerns.
These developments also present new challenges for the U.S.–South Korea relationship. Although the U.S.–South Korea alliance was initially established as a military alliance under the 1953 Mutual Defense Treaty, its economic dimension expanded significantly following the entry into force of the 2012 U.S.–South Korea Free Trade Agreement (FTA). More recently, the alliance has evolved into a broader digital and technology partnership encompassing advanced technologies—including semiconductors, batteries, AI, quantum computing, 6G, cybersecurity, and space—as well as resilient supply chains. Accordingly, if the two countries continue to emphasize their strategic partnership in security and advanced technology while repeatedly encountering regulatory disputes in the digital marketplace, questions could arise regarding the long-term sustainability of the alliance.
2. Current Status and Characteristics of South Korea’s Digital Regulations
South Korea’s digital regulatory framework can broadly be divided into several categories, including personal information and data governance, platform competition, network access fees, location information, and cloud services. First, the Personal Information Protection Act establishes certain requirements governing the cross-border transfer of personal information and authorizes the Personal Information Protection Commission to order the suspension of such transfers under specified circumstances. While the system is intended to protect individuals’ rights over their personal information, the United States has raised concerns that it could impose substantial compliance costs on companies operating global data-center networks. The 2026 NTE likewise notes that restrictions on cross-border transfers of personal information could create barriers to cross-border services that depend on international data storage and processing.
Second is the regulation of online platforms. In South Korea, various legislative proposals and enforcement measures under the Fair Trade Act have been discussed to address practices by dominant platforms, including self-preferencing, tying and bundling, restrictions on multi-homing, and most-favored-nation (MFN) provisions. The stated purpose of these measures is to prevent dominant platforms from abusing their market power and to protect merchants and consumers. In the United States, however, concerns have been raised that applying quantitative criteria, such as revenue and user numbers, could bring a disproportionately large number of U.S.-based global platforms within the scope of these regulations.
Third, network access fees, location-data regulations, and cloud-service requirements have also emerged as areas of contention. The United States is concerned that South Korea’s approach to network access fees could increase costs for U.S. content providers while providing a competitive advantage to domestic telecommunications and content companies. The United States has also argued that South Korea’s requirement for authorization to export high-precision maps and location-based data could place companies providing global mapping and cloud services at a competitive disadvantage. In addition, the public-sector Cloud Security Assurance Program (CSAP) has drawn criticism on the grounds that requirements such as domestic data storage and the use of locally based operational personnel could create barriers to entry for foreign cloud-service providers.
Ultimately, U.S. concerns regarding South Korea’s digital regulatory framework can broadly be grouped into three areas. The first concerns the substance of the regulations themselves, particularly whether they are consistent with international standards and trade commitments. The United States has traditionally relied primarily on ex post enforcement mechanisms, including antitrust litigation and judicial proceedings, to address concerns related to dominant technology companies. By contrast, some of the platform regulations pursued by South Korea adopt a more ex ante regulatory model similar to the European Union’s (EU) Digital Markets Act (DMA), raising concerns in the United States regarding their compatibility with international trade norms.
A related concern is whether such regulations could have a disproportionate impact on U.S. companies. The issue is not simply whether Korean and foreign companies are formally subject to the same rules. Rather, if regulatory thresholds are structured around particular business models or company size in ways that place a heavier burden on U.S. platforms, the resulting impact could constitute de facto discrimination. In other words, even if the statutory language does not distinguish between domestic and foreign companies, high quantitative thresholds based on factors such as revenue or user numbers could, in practice, place a disproportionate burden on major U.S. technology companies such as Google, Apple, and Meta. Concerns have also been raised about the proportionality of regulatory measures to their objectives, as well as the fairness, transparency, and predictability of regulatory enforcement.
3. Recent Coupang Regulations and Bilateral Tensions
The Coupang incident illustrates how digital regulation, trade policy, and bilateral relations can intersect. Although Coupang conducts the vast majority of its business in South Korea, its parent company, Coupang, Inc., is a U.S. corporation incorporated in Delaware and listed on the New York Stock Exchange. This creates a distinctive legal and regulatory structure: in South Korea, Coupang is subject to Korean law as a major distribution and platform operator, while in the United States, regulatory actions against the company may be viewed through the lens of the interests of U.S. companies and investors.
In August 2024, the Korea Fair Trade Commission (KFTC) determined that Coupang had engaged in unfair customer solicitation practices by manipulating search rankings for products sold directly by the company and its private-label (PB) products, while also mobilizing employees to post reviews of PB products. The KFTC subsequently imposed a fine of approximately KRW 162.8 billion and referred the case to prosecutors for criminal prosecution. Separately, in connection with a personal-data breach that occurred in late 2025, the Personal Information Protection Commission confirmed the exposure of personal information belonging to approximately 37.55 million individuals and the unlawful collection of online activity records involving approximately 11.17 million individuals. The commission imposed total penalties of KRW 624.681 billion, reportedly the largest such sanction in South Korean history.
The issue subsequently escalated into a broader trade dispute when U.S. investors argued that measures taken by the South Korean government amounted to “discriminatory” regulation. In January 2026, Greenoaks and Altimeter, investors in Coupang, filed a petition with the U.S. Trade Representative requesting an investigation under Section 301 of the U.S. Trade Act. The petition argued that the investigations and sanctions imposed on Coupang by multiple South Korean government agencies went beyond legitimate regulatory enforcement and constituted discriminatory treatment of a U.S. company. The investors subsequently withdrew the petition on March 9, 2026.
The withdrawal of the petition, however, did not resolve the underlying policy dispute. In July 2026, the U.S. House Judiciary Committee sharply criticized South Korea’s treatment of U.S.-owned companies in a report titled “Closed for Competition: South Korea’s Discriminatory Attacks on American-owned Businesses.” The report characterized simultaneous investigations by more than 10 South Korean government agencies in the aftermath of Coupang’s data breach as a “whole-of-government assault.” It further argued that South Korea’s regulatory practices could undermine the competitiveness of innovative U.S. companies and favor domestic firms rather than promote a level playing field. The report also raised concerns about South Korean regulatory procedures, including administrative investigations conducted without warrants and limitations on attorney-client privilege.
From the U.S. perspective, Coupang is a U.S. company under U.S. corporate law because Coupang, Inc. is incorporated in Delaware. Accordingly, some U.S. policymakers have characterized the broad range of sanctions imposed by South Korean authorities not simply as domestic regulatory enforcement, but as raising concerns under international trade norms, particularly with respect to potential structural discrimination against U.S. companies and investors and questions of due process. At the core of the dispute, therefore, is not whether South Korea has the authority to regulate companies operating in its market, but whether the objectives of regulation are legitimate, whether enforcement procedures and intensity are objective and proportionate, and whether the same standards are applied consistently to similarly situated domestic and foreign companies.
4. The Evolution from the U.S.-Korea Security Alliance to a Digital Alliance
The U.S.–South Korea alliance has evolved through four broad stages: a military and security alliance, an economic alliance, an advanced technology and economic security partnership, and, increasingly, a digital alliance. A major turning point came with the entry into force of the U.S.–South Korea FTA in 2012. The agreement established an institutional foundation for economic cooperation covering goods, services, investment, and intellectual property rights. Following the 2022 summit meeting, the scope of cooperation expanded into what can be described as an “economic and technology alliance,” encompassing semiconductor and battery supply chains as well as critical and emerging technologies such as AI, quantum computing, biotechnology, 5G, and 6G. In 2023, this cooperation was further expanded to include trusted cross-border data flows, standards and norms for digital technologies, and strategic cooperation on cybersecurity.
In 2025, the institutional foundations of the Digital Alliance were further developed. In October, the two countries signed the “U.S.–ROK Technology Prosperity Deal,” establishing a framework for cooperation in strategic science and technology sectors. Subsequently, in a joint fact sheet issued by the U.S. and South Korean leaders in November 2025, the two sides agreed not to discriminate against U.S. companies or impose unnecessary barriers in laws and policies governing digital services; to consult on digital issues, including network access fees and online platform regulation; and to facilitate cross-border data transfers involving location data, reinsurance, and personal information. They also agreed to strengthen procedural fairness in the enforcement of competition laws. These commitments indicate that the U.S.–South Korea Digital Alliance has moved beyond cooperation on AI and semiconductor development toward greater coordination on regulatory principles and rules governing digital markets.
5. Future Challenges—Harmonizing Regulatory Sovereignty and the Digital Alliance
First, South Korea should establish non-discriminatory regulatory principles consistent with international standards. This does not necessarily require abolishing or weakening existing regulations. Rather, the proposed regulatory framework should undergo rigorous ex ante review to ensure that its design is consistent with international trade rules and commitments. In particular, given the growing international debate over the legitimacy and effectiveness of the EU-style ex ante regulatory model, South Korea should exercise caution before adopting such a framework without fully assessing its potential implications.
Second, South Korea should substantially strengthen the non-discriminatory character, transparency, and procedural legitimacy of regulatory enforcement. Whether a company is domestic or foreign, the same criteria for determining violations, investigative procedures, and standards for calculating penalties should apply and should be clearly disclosed. The more consequential the sanctions—including exceptionally large fines or business suspensions that could threaten a company’s continued operations—the more robust the procedural safeguards should be. These safeguards should include proportionality, appropriate judicial or legal oversight, and meaningful access to legal counsel. This is not simply a matter of accommodating foreign demands; it is essential for strengthening the credibility, predictability, and legitimacy of South Korea’s domestic regulatory system.
Third, South Korea should institutionalize “trade impact assessments” when developing digital regulations. Even when a regulation is justified on grounds such as consumer protection or the promotion of fair competition, it can have significant effects on market access for global companies and on cross-border data flows. Accordingly, institutional mechanisms should be established to conduct comprehensive assessments at the legislative and regulatory drafting stages. Such assessments should examine whether proposed measures could result in de facto discrimination against foreign companies, whether they are consistent with international standards, and whether they could create conflicts with international trade obligations, including those under the U.S.–South Korea FTA.
Finally, the most important lesson from the Coupang incident is that alliances in the digital era cannot be sustained through security cooperation alone. If South Korea and the United States are to become strategic partners in AI, semiconductors, cloud computing, data, and cybersecurity, they must build mutual confidence that companies from each country can operate in the other’s market under predictable, transparent, and fair regulatory conditions.
This, however, should not be interpreted as a call for regulatory exemptions for U.S. companies. South Korea must retain its regulatory authority to protect personal information, consumers, and competitive markets while ensuring that its regulations are legitimate, non-discriminatory, proportionate, transparent, and procedurally fair. The United States, for its part, should not automatically characterize legitimate South Korean public-interest regulations as trade barriers and should recognize that South Korea has a distinct sociocultural context and a legal framework that differs in important respects from that of the United States.
South Korea does not formally discriminate against companies on the basis of nationality or country of incorporation and applies the same laws and regulatory principles to foreign companies, including U.S. firms. South Korea’s relevant policies and regulations are not directed at particular countries or companies. Rather, they are intended to promote fair competition in the domestic market, protect consumers, and ensure the consistent application of laws and regulations. These policies also provide U.S. firms with the opportunity to compete in the Korean market on an equal footing with their Korean counterparts.
Ultimately, the foundation of the U.S.–South Korea Digital Alliance is not simply deregulation, but the development of shared digital norms and mutual trust. As the U.S.–South Korea alliance evolves from its origins in military security through economic, technological, and cybersecurity cooperation toward a broader partnership grounded in digital rules and norms, the two countries have an opportunity to emerge as among the most reliable strategic partners in an increasingly competitive technological and digital trade environment shaped by the AI era.